MW AT&T's stock leads S&P 500 gainers as subscriber growth shines

By Emily Bary

Shares of AT&T are bucking the market's weakness as the company's results proved the latest indication of a healthy wireless market

AT&T Inc. topped subscriber expectations in the latest quarter, following Verizon Communications Inc., which announced a beat of its own last week.

For the fourth quarter, AT&T $(T)$ reported 482,000 postpaid phone net additions, whereas analysts tracked by FactSet had been expecting 443,000. AT&T had 0.85% postpaid phone churn, which is a metric that measures a company's ability to retain customers.

Shares of AT&T are up 5.7% in morning action Monday to lead S&P 500 SPX gainers on a tough day for U.S. markets.

"We take AT&T results as another signal that the wireless postpaid phone market performed well in [the fourth quarter] (rather than a zero sum game), and believe T-Mobile could be setup for at least a modest beat," Citi analyst Michael Rollins wrote. T-Mobile US Inc. reports results Wednesday morning.

See more: Verizon's stock rises after biggest gain in five years on key subscriber metric

Like Verizon $(VZ)$, AT&T beat expectations on overall revenue but matched the consensus view on wireless service revenue. AT&T's total revenue was $32.3 billion, versus analyst expectations of $32.0 billion. Wireless-service revenue came in at $16.6 billion, up 3.3% from a year earlier.

"Financial performance for mobility still supports a stabilizing wireless competitive environment, despite the uptick in promotional activity during 4Q and expectations that [Verizon] may continue to use device subsidies to help volume," Rollins wrote.

AT&T came in better than expected on free cash flow, a closely watched metric for its investors given the company's dividend commitments. During the fourth quarter, AT&T turned in free cash flow of $4.8 billion, while analysts were looking for $4.6 billion.

The company is sticking with the guidance previously issued at its investor day late last year, which includes an expectation for $16 billion in 2025 free cash flow, excluding DirecTV. AT&T is also looking to launch share buybacks in the second half of the year, consistent with its target from the December investor day.

"For generous dividend payers like AT&T (an almost 5% yield), buying back stock doesn't just retire equity, it reduces cash (dividend) outlays. That lowers the bar for the [return on investment] of any repurchase campaign," MoffettNathanson analyst Craig Moffett wrote.

AT&T saw further traction in its broadband business during the period, yielding a net of 307,000 subscriber additions in fiber.

-Emily Bary

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January 27, 2025 11:33 ET (16:33 GMT)

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